Civil Procedure Class Notes 10/28/03

We’re leaving Erie, but we’re staying in the choice of law area for one more day.

There was a stream of e-mail questions about the scholar’s tests.

Wright said that Erie is really hard. Yeazell says that it isn’t that hard.

It all starts with Erie, then it gets broadened by York, limited and “balanced” a bit by Byrd, and then the FRCP are defended with Hanna.

Issacharoff says that Hanna should control. His rubric is a visualization of Hanna.

Chemerinsky is the other guy, and that’s how you spell his name.

The four cases above establish the “Erie” doctrine, and the other cases we looked at were applications of the doctrine.

Erie, the case, is very easy. We will apply judicial decisions as they interpret state law. We’ll use the rule of Klaxon: a federal court ordinarily must apply the choice of law rules of the state in which it sits.

Choice of law

This is really an entire course. You’re not going to get even much of a flavor of it in one day.

All courts, state and federal, must make choice of law decisions.

Gries v. Modell

What’s goin’ on? Gries and Modell were shareholders in the Cleveland Browns. They made an agreement in 1965 that they amended in 1971. Gries was trying to elect two directors based on the 1965 agreement, but Modell argued that the 1971 agreement totally replaced the 1965 agreement. This is a fight over who is going to control the board.

Modell was the majority shareholder, and Gries was a minority shareholder. The specifics aren’t terribly important. Fairman isn’t sure where we’d learn such details. It’s a big shareholder dispute.

What’s the choice of law issue? Why do we even have a choice of law issue here? The corporation is incorporated under Delaware law, but the team is in Ohio. Arguably, since Delaware law governs the corporation, Delaware law covers the contracts.

In this specific type of contract, why does it matter which state’s law applies? If Ohio law applies, the 1971 agreement is an amendment. If Delaware law applies, the 1971 agreement is a whole new contract. Delaware law imposes a limitations period on exercising voting rights agreements. If the 1971 agreement is an amendment to the 1965 agreement, then the voting agreement has expired under Delaware law. In Ohio, there is no such provision.

The battle is basically over whether this lawsuit shall be allowed to go forward or not.

Nobody cares about choice of law unless there’s a difference in the laws of the various possible jurisdictions.

The lawsuit is filed in Ohio in Cuyahoga County. The trial court judge applies Ohio law and orders specific performance for the plaintiff. This result should not surprise us…why? Most courts will try to apply their own law at first blush. It’s convenient and they’re familiar with it.

At the court of appeals, the trial court ruling is reversed and they say that Delaware law applies.

Even though choice of law issues are preliminary, you only get to deal with them on appeal.

Modell appeals to the Ohio Supreme Court, which agrees with the trial court that Ohio law should be applied. The Ohio Supreme Court changes the standard by which Ohio courts decide choice of law issues in contract cases. The old rule is that the place where the contract is to be performed governs.

Why use a “place of performance” rule? It’s an easy, black letter rule. Most contracts have a place of performance. If you can identify what that it, you can identify which state’s rules apply. What other advantages would there be? If a contract is being performed somewhere, it makes sense that the law of that place applies.

The Restatement (2d) of Conflict of Laws says that the rule given only applies in the absence of an effective choice of law provision in the contract in question.

The new test is the most significant relationship test. It’s a factor test!

Those factors include:

· The place of contracting

· The place of negotiation of the contract

· The place of performance

· The location of the subject matter of the contract

· The domicile, etc., of the parties

The contract was made in Ohio, negotiated in Ohio, performed in Ohio. The subject matter was in Ohio, and the parties are domiciled in Ohio and Delaware. Ohio wins!

Note that part of the purpose of the Restatements is to eliminate black line rules and allow more discretion by considering and weighing multiple factors.

Now, it’s time to look at another case that came out the same day! What does that tell us? The Ohio Supreme Court is trying to resolve two of the biggest choice of law issues at once: choice of law in contracts, and choice of law in torts. The court says that from here on out, we’re adopting different standards, namely, the Restatement standards.

Morgan v. Biro

What’s happening? Morgan is a Kentucky resident and a part-time employee in a supermarket. Morgan slipped and got his arm grinded by a grinder made by Biro. The meat grinder was manufactured in Ohio. It was sold to someone in Tennessee, and then resold to the Kentucky supermarket. The protective guard that was originally on the meat grinder was at some point removed.

Morgan is down an arm, and he’s going to sue somebody. He’s suing Biro. He initially chooses to sue in Franklin County, then the case gets removed to Ottawa County. The choice of law is issue is either we use Kentucky law or Ohio law.

What is it about Kentucky law that would affect the outcome of the case? Under Kentucky law, the case would probably fail. The statute creates the presumption that a product is not defective if the injury occurs more than 5 years after it is made. What’s the purpose of this statute? The product might get modified or damaged over time. It’s kind of far-fetched to try to claim that it was the manufacturer’s fault.

What was the law in Ohio? There is no equivalent provision. This is a frequent form of a choice of law issue: one state has something and one state has nothing. In this case, nothing is a powerful option for the plaintiff.

There was an old rule called lex loci delicti, which means you apply the substantive law of the place where the injury occurred. Why would a jurisdiction want to use a rule like this? It’s an easy and uniform test.

The court rejects the lex loci delicti rule, and instead adopts a rule from the Restatement. Basically, the Restatement uses elements of lex loci delicti, but also creates the most significant relationship test. The factors to be considered are:

· Place of injury

· Place of bad conduct

· The domicile, etc., of the parties

· Location of the relationship between the parties

The place of injury is Kentucky. The place of the bad conduct is, allegedly, Ohio. The parties are located both in Kentucky and Ohio. There is no relationship between Morgan and Biro for the purposes of this test.

It seems that this is a tie, but not all of these factors are weighed the same. For example, the place of injury is important.

The court lists numerous contacts between the plaintiff and the state of Kentucky to show that Kentucky law should apply. However, many of the factors listed are not actually listed in the Restatement section they had just cited.

The dissent says that public policy demands that Ohio companies be subject to Ohio law because they receive the benefits and protections of Ohio law.

Hypothetical

Holly (from Vermont) and Steve (from New York) get in a car wreck in Canada. Holly sues Steve in Vermont for her injuries. What law will we apply?

The place of injury is Canada. The conduct causing the injury could be Canada or Vermont because they started drinking in Vermont. The parties were from Vermont and New York. The relationship of the parties was in Vermont. The conclusion is that we use Vermont law.

State courts in the United States try to apply domestic law before they will apply the law of foreign jurisdictions.

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